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Replies to post #23135 on West Coast Ventures Group Corp (fka WCVC)
(9) NOTES PAYABLE TO THIRD PARTIES
a) Future Receivables Sale Agreements
The Company, through Nixon Restaurant Group, Inc., J&F Restaurants, LLC, Illegal Burger, LLC, Illegal Burger Writer Square, LLC and Illegal Burger Capitol Hill, LLC, entered into several agreements to obtain advances against future restaurant credit/debit card sales. The agreements provide for funding of various percentages of future qualified credit/debit merchant card receivables. At September 30, 2018 and December 31, 2017, the total payable balances inclusive of interest under these factoring agreements were $205,472 and $230,791, respectively.
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(9) NOTES PAYABLE TO THIRD PARTIES, continued
a) Future Receivables Sale Agreements, continued
During the first quarter 2018, we negotiated settlement agreements with two of these lenders to pay off the balances owed at the rate of $8,000 per month over two years and $4,000 per month over one year. The balance of these settlement agreements is $38,370 at September 30, 2018.
b) One Year Note
The Company, through J&F Restaurants, LLC, entered into a one year note with a third party for a loan of $88,000. This note was payable daily in the amount of $376.64 paid via ACH draft from the J&F Restaurants, LLC - El Senor Sol Evergreen bank account. This note carries interest at a 7% rate. This note was renewed on December 30, 2016, and the Company received $74,548 in cash, which is net of the $10,452 remaining balance. The new note is payable as a percentage of future qualified credit/debit merchant card receivables. The loan balance was $31,984 and $51,608 at September 30, 2018 and December 31, 2017, respectively.
c) Convertible Notes - Variable Conversion
In the third quarter 2018, the Company entered into a convertible note in exchange for $68,000 in cash. This note matures in nine months and carries a 12% interest rate. The note converts into shares of the Company’s common stock at a price of 61% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. The Company entered into a settlement agreement with the holder of one of the variable conversion notes which requires the Company to pay installments of $15,000 on August 31, $35,000 on October 31, $50,000 on November 30 and $100,000 on December 31, 2018. This agreement does not allow for the lender to convert any of the then remaining debt. The lenders’ only recourse is to file suit should the Company not make timely payments. This agreement included a penalty of $40,528 as a portion of the $200,000 total settlement of which $185,000 is outstanding at September 30, 2018.
In the first quarter 2018, the Company entered into three convertible notes in exchange for $280,000 in cash. These notes mature two in nine months and one in six months and carry 12% and 8% interest rates. The notes convert into shares of the Company’s common stock at a price of 61% and 60% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 and 20 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
In 2017, the Company entered into two convertible notes in exchange for $130,000 in cash. These notes mature in nine months and one year and carry 12% and 8% interest rates. The notes convert into shares of the Company’s common stock at a price of 61% and 55% of the average of the two lowest trade prices and the lowest trade price for the Common Stock during the 15 and 20 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
In 2017, the Company, through a wholly-owned subsidiary, issued a Convertible Promissory Note in exchange for $30,000 in cash. This note matures in one year from issuance and carried a 10% interest rate. The note converts into shares of the Company’s common stock at a price of 65% of the average closing price for the Common Stock during the three (3) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
In 2016, the Company issued a convertible note in the amount of $51,221. At issuance of the note, the Company recorded a beneficial conversion feature discount of $51,221. This note was due in January 2018 and carries a 4% interest rate. In July 2017, $30,000 of this note was converted into 3,000,000 shares of the Company’s common stock. The balance of this liability has been incorporated into liabilities from discontinued operations.
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(9) NOTES PAYABLE TO THIRD PARTIES, continued
d) Convertible Notes - Fixed Conversion
During the third quarter of 2018, two parties purchased through assignment three of the variable conversion price convertible notes then outstanding. These parties immediately amended the notes to replace the variable conversion rate with a fixed conversion rate of $0.0035 per share of the Company’s common stock. The maturity dates of the three notes was extended to 2020 and 2021.
e) Third Party Notes Payable
In March 2015, the Company, through Illegal Burger, LLC, entered into an agreement with a third-party lender, who extended a $3,000,000 Senior Secured Note. Under the terms of this agreement a first draw was entered into in the amount of $375,000 as a Revolving Note. The lender retained $59,713 of this draw as fees. Under the terms of this Note, the Company was required to replace their credit card/debit card merchant processing to the lender. The lender retained 100% of the credit card/debit card transactions, and forwarded four wire transfers to the Company over a six week period. The credit card/debit card transactions for this six-week period amounted to $84,534. The lender remitted $42,379 of this amount to the Company. Of the $42,155 retained by the lender, $14,861 was applied as principal reduction, $7,088 was applied to interest expense and the remaining $20,206 was charged as fees. The Senior Secured Note also called for the payment of a $75,000 investment banking fee.
In May 2015, when it was determined that this repayment structure was not practical for a restaurant operation, the lender agreed to restructure the Revolving Note into a Replacement Promissory Note. This Replacement Promissory Note carries interest at a stated rate of 18% with a maturity of June 1, 2016. The lender charged the Company a $25,000 penalty to convert the Revolving Note into a Replacement Promissory Note. The Replacement Promissory Note called for interest only payments in June, July and August 2015. Starting in September the terms called for the payment of interest, principal starting at $33,649 increasing monthly to $38,474 in June 2016, as the interest on the then outstanding balance fell. In addition, the Replacement Promissory Note called for the payment of a $106,000 Redemption Premium as part of the total monthly payment of $49,651.
As a direct result of delays in opening the new Writer Square location, the lender agreed to interest only payments via ACH draft every Monday. In June 2015, the Company paid $1,080 per week, which was increased to $1,200 per week for July 1 through October 15, 2015. It was then increased to $1,500 per week from October 16, 2015 through the third week of March 2016, when it was increased to $2,000 per week.
At both September 30, 2018 and December 31, 2017, the principal balance of the loan was $322,220. The Company also accrued the $25,000 conversion penalty, the $75,000 investment banking fee and the $106,000 redemption premiums as accrued interest because the Replacement Promissory Note allows for prepayment but all these “fees” are due upon prepayment.
On October 8, 2018, the lender filed suit in Broward County, Florida. The Company has received an extension of time to answer this lawsuit. The Company expects to either negotiate a settlement agreement or to vigorously defend this action.
Certain other third parties have advanced funds to WCVC to fund its ongoing operations prior to the reverse acquisition. These advances have been formalized into demand notes payable, which, at September 30, 2017, amount to $54,039 and carried a 5% interest rate. WCVC has a $250,000 note payable which matured in April 2018 and carried a 5% interest rate. These liabilities have been incorporated into liabilities from discontinued operations.
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